Many face higher taxes in new year
By David Post
Here come the tax hikes, and the no-tax-increase pledgers arenít complaining.
Whatís the real deal with the no-tax-increase pledgers? Do they only complain (and filibuster) if taxes are raised on millionaires, but they donít care if taxes are raised on everyone else?
They didnít complain last week about the looming payroll tax increase on the middle class. In fact, several of the presidential candidates supported increasing the payroll taxes on the middle class even though they oppose increasing taxes on millionaires.
The no-tax-increase pledgers seem to think that an increase in rates is bad, but a decrease in deductions is OK. Whatís the difference? Both raise your taxes. If your tax bill goes up, regardless of the reason, isnít that a tax increase?
All kinds of taxes are going up next week, and the no-tax-increase pledgers must be in hiding.
Taxpayers who itemize deductions on their federal returns can deduct state income taxes, lowering their tax bills. Nine states have no income tax, so a special tax break has allowed them to deduct their sales taxes for the past couple years. That ěloopholeî expires next week, so taxpayers in Florida, Texas and seven other states will pay more taxes.
Taxpayers adopting children lose some tax benefits, so they will pay higher taxes.
School teachers who pay for extra classroom expenses out of their own pockets ó particularly now when school systems are so strapped ó are losing that deduction and will pay higher taxes.
New homebuyers who arenít able to put 20 percent down on a house have been able to deduct their mortgage insurance premiums. Next week, that benefit expires, so those taxpayers will pay more taxes and their housing costs will go up.
Students lose deductions of up to $4,000, so their (or their parentsí) taxes will go up.
Where are the no-tax-increase pledgers who vowed to protect us from all tax increases? Not even a whimper.
Thatís just a start. In fact, about 75 different tax increases go into effect next week. But the entire debate over the past few months has been about those who earn more than $1 million per year. Somehow, they have morphed into the economyís ějob creators,î so the country canít risk raising the taxes on the few and the wealthiest.
Instead, taxes will rise on the many and the middle class.
Allowing businesses to increase their depreciation deduction is supposed to spur the economy. For example, when a company buys a piece of equipment for $100,000 that will last five years, that business can deduct $20,000 each year. This year, however, that business could deduct the full $100,000 in the first year, which reduces its income by another $80,000 and reduces its taxes. Though this ěsteals deductions from the future,î the theory is that the increased depreciation will increase demand for equipment. Manufacturers will hire workers to make that equipment and the buyers will hire people to use it. Next week, those special depreciation deductions are being reduced, so small businesses trying to grow will pay more tax.
Tax benefits that help subchapter-S corporations are disappearing next week, which will increase taxes on those small businesses. A special tax benefit for military housing is expiring that which will cause those housing costs to increase.
Various charitable contribution laws that encouraged gifts to food banks and schools are expiring next week. That means the givers will pay more tax; food banks will have less food; and schools will have fewer books and computers.
Energy production and efficiency is generally recognized as one of the largest and most critical potential job generators in the decades ahead. A dozen or so tax benefits encouraging energy development are expiring, meaning reduced R&D and fewer jobs in that area of the economy.
The list goes on.
As the clock ticks toward the new year, no-tax-increase pledgers are silent as taxes are poised to go up for millions of middle income taxpayers including small businesses, students, school teachers, homebuyers, military personnel, families adopting children and people who donate to schools and food banks.
Ironically, the no-tax-increase pledgers have successfully opposed tax increases on millionaires and, at the same time, have been strangely silent about next weekís tax increases on millions of middle income taxpayers.
Why are middle class taxpayers not outraged? Will they finally rise up next February when Congress faces these issues yet again? Or will the no-tax-increase pledgers once more pull the wool over their eyes?
David Post is a co-owner of the Salisbury Pharmacy and an adjunct professor at Georgetown University.